If a Firm Uses a Project-Specific Cost of Capital for Evaluating

Multiple Choice

If a firm uses a project-specific cost of capital for evaluating all projects, which situation(s) will likely occur?
I.The firm will accept poor low-risk projects.
II.The firm will reject good high-risk projects.
III.The firm will correctly accept projects with average risk.

A) I only
B) II only
C) III only
D) I, II, and III